Employee Trust Fund:
An employee trust fund is a form of a long term saving plan established as a job benefit. Both the employer and the employee may contribute to an employee trust fund. The best-known forms of employee trust fund are the stock ownership plan and the pension plan.
: Preparation of statement of plan net position and a statement of changes in plan net position of the Employees Retirement System Fund for the year ended June 30, 2018
Answer to Problem 16.14P
Net Assets held in trust for pension benefits are equal to $540,000 and Net increase from the statement of changes in Plan Net Assets is equal to $76,000.
Explanation of Solution
Preparation of a statement of plan net assets of the Employees Retirement System Fund for the city B’s as shown below:
City B’s Employees Retirement System FundStatement of plan net assetsAs on June 30, 2018 | ||
Assets | Amount ($) | Amount ($) |
Cash and short-term investments | 38,000 | |
Receivables: | ||
Due from the city | 4,000 | |
Interest receivable | 5,000 | |
Total Receivables | 9,000 | |
Investment, at fair value | 497,000 | |
Total Assets | 544,000 | |
Liabilities | Amount ($) | Amount ($) |
Refunds payable (Due to resigned employees) | 1,000 | |
Annuities payable | 3,000 | |
Total Liabilities | 4,000 | |
Net Assets held in trust for pension benefits | 540,000 |
Preparation of a statement of changes in plan net assets of the Employees Retirement System Fund for the city B’s as shown below:
City B’s Employees Retirement System FundStatement of changes in plan net assetsAs on June 30, 2018 | ||
Particulars | Amount ($) | Amount ($) |
Additions | ||
Contributions: | ||
Employer (Note:1) | 20,000 | |
Plan members (Note:2) | 32,000 | |
Total Contributions | 52,000 | |
Investment Income: | ||
Net appreciation (depreciation) in fair value | 13,500 | |
Investment earnings received | 30,000 | |
Accrued earnings at year-end | 5,000 | |
Net Investment Income | 48,500 | |
Total additions | 100,500 | |
Deductions: | ||
Annuities paid during the year | 13,000 | |
Annuities payable at year-end | 3,000 | |
Refund made during the year | 2,500 | |
Due to resigned employees at year-end | 1,000 | |
Administrative expenses | 5,000 | |
Total Deductions | 24,500 | |
Net Increase (Net Investment Income-Total Deductions) | 76,000 | |
Net assets held in trust for pension benefits: | ||
Beginning of the year (July 1, 2017) | 464,000 | |
End of the year (July 1, 2018) | 5,40,000 |
Notes:
- Contribution from Employer = Amount received from employer + Amount due from the city At year end
- Amounts received from employees are considered as plan members.
= $16,000 + $4,000
= $20,000
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Chapter 16 Solutions
Advanced Accounting
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